Investors

Chairman's Statement

 40th ANNUAL GENERAL MEETING

Dear Shareholders,

It is my privilege to welcome you all to the 40th Annual General Meeting of your Company which is acknowledged globally as one of the largest and best power companies in the world.

Power is an integral part of our lives. Your company meets nearly a quarter of our country's power needs. By enabling people to switch on their lights, we brighten their lives. By enabling people to produce goods and services, we enrich their lives.

Optimistic Growth Outlook

The basic national megatrends indicate a promising future for your Company despite the overall atmosphere of uncertainty in the global business scenario.

India is the fastest growing major economy in the world with a huge potential appetite for power consumption. Shareholders may appreciate that on 9th September 2016, the actual energy demand met in the country was an all time highest at 3,539 MU and your Company (along with group entities) contributed 866 MU. Thus, green shoots are visible as far as upswing in power demand goes and this is in line with our long held expectations of growth.

Your Company is one of the engines of economic growth. The more the economy grows, the greater the opportunities for it.

Your Company’s long term strategy is aligned to the country’s growth plans emanating out of the commitment to provide 24X7 uninterrupted quality power to all at competitive rates. Including the addition of 325 MW by its JV at Patratu, your Company has commissioned 10,125 MW in the Twelfth Five Year Plan so far, and aims to commission around 4,500 MW more during FY17. As a responsible corporate citizen, we also aspire to be a front runner in solar power generation space.

Your Company remains the market leader in power generation in the country, and is appreciated across the globe for its strengths. It is ready with the strategies and action plans to leverage its strengths for greater contribution to the power sector and the economy.

Transformational changes in Power Sector

Moving swiftly in the pursuit of affordable ‘Power for All’, the power sector has witnessed major changes in the recent past. Some initiatives include:

  • Financial Restructuring Scheme for DISCOMs - Ujwal Discom Assurance Yojana, or UDAY, to turnaround the ailing state of distribution companies. UDAY Bonds worth about ₹1.66 lakh crore have been issued, relieving the balance sheets of state DISCOMs and thereby enabling higher capacity utilization by generators.
  • The New Tariff Policy has been issued with around 30 amendments. The amendments are aimed at achieving the objectives of UDAY with the focus on 4 E’s: electricity for all, efficiency to ensure affordable tariffs, environment for sustainable future and ease of doing business to attract investments. The policy makes a strong pitch for allowing sale of un-requisitioned power, promoting clean energy, and improving quality of power supply. It has provisions for improving financial viability of the sector, and attracting more investments.
  • India recorded lowest ever energy deficit of 2.1% in FY16.
  • Ministry of Coal circulated policy guidelines for grant of “Bridge Linkage” to specified end-use plants of Central and State Public Sector Undertakings. It will help the power generators to bridge the gap between requirement of coal and the start of production from the linked allotted coal mine/block. Under the policy bridge linkages were granted to 7 NTPC plants with a capacity of 12200 MW
  • India recorded the highest ever growth in coal production by Coal India Limited. From a situation of coal stock of less than 7 days at many generating stations, the situation now is a comfortable coal stock of more than 10 days at most coal-based stations.
  • Rationalization of movement of coal to reduce electricity costs, and rationalization of coal grades based on Gross Calorific Value for correct tariff fixation.
  • Generation Capacity addition was 23976 MW in FY16. Additionally, 4028 MW of renewable capacity was added which highlights the accelerating speed of solar and wind capacity addition along with conventional capacity.
  • Per capita energy consumption has risen to 1075 kWh.
Robust performance

Major highlights of your Company's performance during FY16 include:

  • Generation of 263.42 BUs of electricity by NTPC Group, which was around 24 per cent of the total power generation in India from nearly 15 per cent of the national generation capacity, underscoring high productivity.
  • Operation of NTPC’s coal based stations at average Plant Load Factor (PLF) of 78.61% against all India PLF of 62.29%; average Availability Factor of 88.06% on bus bar during the year, with three NTPC stations being ranked the topmost stations of the country, recording more than 90% PLF, and 11 stations (including those under JVs) among the top 25 stations.
  • All time high stand alone CAPEX of ₹ 25,960 crore exceeding the MoU target of ₹ 23,000 crore. NTPC Group CAPEX stood at ₹ 32,091 crore.
  • Commissioning of power projects of 2,255 MW aggregate capacity, including 110 MW solar projects.
  • Declaring 1,960 MW Power Projects on commercial generation.
  • Starting commercial operation in its first hydro project at Koldam with total capacity of 800 MW.
  • Earning ₹ 70,506.80 crore as net revenue from operations and ₹ 71,696.07 crore as total revenue, with net profit after tax (PAT) at ₹ 10,242.91 crore.
  • Offer For Sale of 5%, and Employee OFS of 0.22% Equity Share Capital, consequently Government of India's shareholding standing at 69.74%.
  • An interim dividend of ₹ 1.60 per equity share in February 2016. The Board of Directors of your Company has recommended a final dividend of ₹ 1.75 per equity share for 2015-16, subject to your approval, increasing the total dividend to ₹ 3.35 per share. The total dividend payout including tax would be 32.42% of PAT, compared to 24.09% last year.
  • Construction of about 29000 toilets in schools under Swachh Bharat - Swachh Vidyalaya Abhiyan in 17 states across the country.
  • Various best-in-industry recognitions and awards, such as:
  • No. 2 Independent Power Producer and Energy Trader Globally in the Platts Top 250 Global Energy Company Rankings, 2015;
  • 4th among the Asian electric utilities in 2016 rankings as per Forbes Global 2000;
  • Dun & Bradstreet Corporate Awards 2016 for best performing Company in India in Power Sector and Best Maharatna Company.

Continuing the trend of high performance your Company has posted impressive achievements in FY17 also:

  • A profit of ₹ 2369.5 crore in Q1 FY17, marking an increase of 4.1% over corresponding period last year.
  • Generation grew by 10% in Q1 FY17 year-on-year as compared to that in FY16.
  • Commenced trading of un-requisitioned Surplus Power (URS) at Power Exchange through its trading arm NVVN since June 2016. Gains from these transactions will be shared in the ratio of 50:50 with the beneficiaries whose URS is sold.
  • Commenced mining operations from the western quarry in Pakri Barwadih from May 2016. This is a landmark milestone towards making operations of your Company self-reliant.
Strong Growth on the Ground

The installed capacity of NTPC Group today stands at 47,228 MW, which includes 800 MW of hydro, and 360 MW of solar generation capacity.

Various projects of your Company, having an aggregate capacity of around 24,000 MW are under implementation at 23 locations across length and breadth of the country. This includes 4,050 MW being undertaken by joint venture and subsidiary companies. This translates into a CAPEX of about Rs 1,60,000 crore.

Out of the total capacity under implementation, 1329 MW is based on diversified sources of renewable energy. The Company is quickly moving towards its ambition of achieving a solar portfolio of 10 GW, out of the 100 GW target of GoI by 2022

Your Company is in advanced stages of commissioning projects of around 4,500 MW capacity in FY17.

Considering inorganic growth as an advantageous strategy, your Company has formed Patratu Vidyut Utpadan Nigam Limited, a Joint Venture Company with Government of Jharkhand, to maintain and operate the existing units and setting up new thermal power units of 4,000 MW capacity - in two phases. NTPC holds 74% stake in the JV.

NTPC has also entered into Joint venture with Coal India Limited to reviveGorakhpur and Sindri plants of Fertilizer Corporation of India and a Company named“Hindustan Urvarak & Rasayan Ltd” has been formed.

As a part of internationalization of its operations, Bangladesh-India Friendship Power Company Limited (BIFPCL), a 50:50 JV of your Company with Bangladesh Power Development Board, is building a 2X660 MW Maitree Super Thermal Power Project. BIFPCL has awarded an EPC contract to BHEL for setting up the units.

More Fuel, Better Fuel

With about 7 billion metric tonnes of geological reserves estimated at its ten coal blocks, your Company expects to produce about 107 million metric tonnes of coal per annum. Mining operations have commenced in Pakri Barwadih, and your Company has progressed well in other coal blocks also.

Coal sampling and determining the grade of coal are very important steps having impact on the quality and price of coal as also on the cost of generation. MoUs for third party sampling and analysis of coal have been signed which will further drive down the cost of generation. Such analyses have been started and are to be carried out pan-NTPC at loading and unloading ends by Central Institute for Mining and Fuel Research (CIMFR), a laboratory of Council of Scientific & Industrial Research (CSIR). This would help in transparently assessing the quality of coal and enable resolution of differences with coal companies.

Cheaper Power to Customers

With initiatives of Ministry of Power and Ministry of Coal, rationalization of coal linkages has been brought about for optimization of transportation cost and de-congestion of railway network.

Your Company has moved forward on coal freight rationalization thereby reducing coal transportation costs. With improved domestic coal supplies, your Company has been able to minimize import of coal. With these steps, your Company has been able to reduce the tariff by 14 paise (~4.3%) in Q1 FY17 as compared to Q1 FY16.

Strong investor confidence

Your Company has the highest credit rating from domestic agencies reflecting its leadership position in the country’s power sector and strong financial profile. Its international ratings are at par with sovereign ratings.

The high investor support and confidence is seen in the success of your Company’sGreen Masala Bonds, the first from an Indian Corporate. Considering the great interest displayed by investors, the Company upsized the bond issue, from an initial target of ₹1000 crore to ₹2000 crore. It was priced at an attractive yield of 7.48% with 5 year tenure. These are ‘green’ bonds with third party assurance, and Climate Bonds Initiative certification – to be used for financing the renewable energy projects of the Company.

Your Company also raised tax free bonds of ₹1000 crore, which received an overwhelming response. With a proactive and prudent approach to fund raising backed by a stellar record of delivering projects on time, your Company has been able to reduce its average cost of borrowings to 7.67% as compared to 8.07% in the previous year.

Your Company also placed bonds of Rs. 3542.50 crore in current fiscal in the domestic market at very competitive coupon rate ranging from 7.47% to 8.10% for maturities upto 15 years.

Leveraging technology and adopting appropriate strategies for sustainable power generation

Your company has adopted the ‘triple bottom-line’ approach, recognizing People, Planet and Profit as the pillars of corporate sustainability. It recognizes that preserving, nurturing and sustaining the environment is critical to our society, economy, business and people. It is actively engaged in reducing its carbon footprints.

Your Company is committed to providing power at least possible economic and environmental costs with its approach of ‘low cost low emissions’.

Your Company developed a Sustainable Development Plan for FY16 that covers waste management, water management, biodiversity, and promotion of renewable energy.

Increasing efficiency of generation reduces GHG emissions per unit of power. With emphasis on efficiency of electricity generation, your Company is all set to adopt ultra super critical technology by improving steam parameters in its latest projects like Telangana Super Thermal Power Project. Plant efficiency of such units is expected to increase by around 8% over that of a conventional subcritical 500 MW unit and 3% over super critical units. This is in continuation of your Company's philosophy to only proceed with high efficiency Super Critical and Ultra Super Critical technology based power plants.

While the earlier emission norms stipulated limits for particulate matter only, the revised norms, notified in December 2015 and to be applicable from December 2017, stipulate stringent emission limits for NOx, SOx and Mercury also, depending on the size and age of plants. New plants are being designed to comply with new norms. As high as 12-15% of project cost is being spent on various environment protection equipments.

Your Company is setting examples by increasing the use of solar power in its own facilities. Solar cooking facilities and water heating systems have been installed at many stations. I am delighted to share that your Company was awarded the Ministry of New and Renewable Energy Excellence Award for Solar Thermal Cooking System at NTPC Dadri.

Your Company is fully committed to sustainable power generation and is conscious of the fact that India has only 4% of global water with 17% of the world’s population. In line with the revised Tariff Policy, your Company has initiated discussions with Municipal Corporations located within 50 km of its power plants to start using treated sewage water from their water treatment plants. This would help releasing water for nearly 7.5 million people.

Your Company has increased its thrust on water conservation and control of water pollution as per the guiding principle of “3R”s: Reduce, Re-use and Recycle. Another major initiative by your Company is reducing consumption of water per unit of generation in light of the environmental norms recently notified by the Ministry of Environment, Forest and Climate Change. Your Company’s proactive approach seeks to make all its power stations operate with Zero Liquid Discharge (ZLD) progressively.

India has only 1% of global forest resources with 2.3 % of land mass. The country needs massive tree plantation efforts. Your Company has planted nearly 23 million trees until FY16 in and around its projects, on vast stretches of land, to serve as a carbon sink. Further, 10 million trees have been targeted for the year 2016-17.

With every sheet of paper we use, we use part of a tree. Saving trees is as important as planting trees. Your Company has taken various initiatives to minimize use of paper and is aiming to move towards a paperless working environment. In this regard I also solicit support from shareholders to contribute for this noble cause and register their email-IDs with the Company or Registrar for receiving communication in electronic form.

Thus, sensitivity to the environment is central to your Company’s growth and performance.

Expanding social outreach

Along with focusing on environmental sustainability, your Company commits itself to take care of the society, especially the community in the neighborhood of its business units by improving the quality of life of the people and promoting inclusive growth.

The focus areas of CSR are health, sanitation, drinking water, education, capacity building, women empowerment, social infrastructure development, and support to differently-abled persons.

I am pleased to inform you that your Company has spent ₹491.80 Crore during the financial year 2015-16 towards CSR initiatives, which is well-above the mandated 2% of Profit After Tax.

During the year, your Company contributed to the “Swachh Vidyalaya Abhiyan by making available about 29,000 toilets in 16,000 government schools in far-flung areas for the benefit of students, especially girl children, covering 82 districts in 17 States across the country.

Your Company is supporting “Skill India Mission” of the Government of India through MoU with National Skill Development Corporation (NSDC) and National Skill Development Fund (NSDF) under the Ministry of Skill Development and Entrepreneurship. Your Company will help develop a large number of multi-skill centers and provide vocational training to about, 30,000 youth around NTPC business units with special focus on the Eastern Region to help the youth become employable. Around 50 such centers are already functional. NTPC’s initiatives were recognized in the form of Gold Trophy and Certificate of Merit 2015-16 ASSOCHAM Awards.

In order to develop professionals in specialist domains, IIIT at Naya Raipur in Chhattisgarh set up by NTPC has started functioning from the academic session 2015-16.

In addition to disability rehabilitation centers being run by NTPC Foundation at 5 locations, your Company has entered into an agreement with ALIMCO (Artificial Limbs manufacturing Corporation of India) for distribution of aids and assistive devices to about 5,000 differently abled persons over a period of 3 years.

Your Company has completed work on piped water schemes at 30 villages, and has a target to cover 50 more villages. It also commenced renovation & deepening of 30 water bodies.

In a nut shell, the philosophy of socially responsible economic growth drives your Company’s strategies and activities.

Proactive Corporate Governance

Your Company respects your rights as the owners of the Company. At your Company, Corporate Governance is not merely a matter of compliance, but is an article of faith. It is inbuilt in the fabric of all our structures and the flow of all our processes as a means to improve efficiency, enhance investor confidence, and boost returns to our shareholders.

Your company is committed for sustainable wealth creation for all its stakeholders by adopting best practices. Transparency, accountability, fairness and extensive communication with stakeholders are integral to our functioning. We believe in system driven performance and performance oriented systems.

Your Company continuously scans the business environment to adopt the best strategy in the fast-changing energy business scenario. It is leaving no stones unturned to make processes lean, remove bottlenecks, sharpen its core competence, optimize costs, diversify across the energy value chain, and most importantly, minimize generation cost.

Your Company places the greater good of the society at par with business growth, and brings into its business a strong social conscience. It adopts policies that include environmental protection, community development, whistle blowing, ethical practices, and core values’ actualization.

Your Company has bagged ASSOCHAM’s 1st Corporate Governance Excellence Award in listed PSUs category for 2015.

Team NTPC: A committed force of value creators

I believe that your Company’s productive employees are its most valuable assets. The core competence of your Company is embedded not in the world-class machines, but in the minds and hearts of the 22500+ committed members of Team NTPC who always demonstrate tremendous dedication, and derive satisfaction from working round the clock to lighten up your homes, and set the nation on the track of further industrialization and progress. This satisfaction is reflected in your Company being adjudged as the ‘Best Company to Work for 2016’ in Public Sector Category in a study carried out by Great Place to Work Institute and the Economic Times.

Your Company needs to bring in new blood and maintain a talent pipeline of dynamic young professionals who can be groomed for bigger roles in the future. Therefore it regularly recruits graduate engineers through a stringent selection process and puts them through a 52 week extensive training and induction program, which is probably the only program of its kind in the sector. This program helps the Engineering Trainees to learn about the power plants in a structured manner including simulator training and prepares them for running the power stations across the country.

Retirement of many senior people in the near future is one of the challenges before your Company. Your Company is putting into place systems to preserve its intellectual capital by ensuring maximum knowledge-capture and effective succession planning.

Your Company makes sure to respect the fundamentals of mutual trust and a spirit of progressive partnership for growth and success among employees – by ensuring communication across all plants, all levels, as also with unions and associations.

Healthy employees are productive employees. Your Company has launched an innovative scheme named ‘Health Champion Scheme’, to promote awareness about health and to encourage health conscious employees with a view to improving employee productivity and overall well-being.

Safety of employees of your Company and its associates is being given sharper focus with a view to adopting global best practices in consultation with world class institutions.

Acknowledgement

I take this opportunity to place on record my sincere thanks and gratitude to the Government of India, particularly the Ministry of Power, CERC, CEA, State Governments, our valued Customers, Auditors, Vendors, and other authorities and agencies that provide unstinted support to your Company.

I convey my appreciation to my colleagues on the Board for their invaluable contribution in strengthening the Company.

I express my special thankfulness to the investors and shareholders for their sustained support to the Company.

On behalf of the 22500+ committed members of NTPC Family, I assure you of our total dedication and tireless efforts in fulfilling your expectations.

Thank you,



New Delhi,
September 20th, 2016


(Gurdeep Singh)
Chairman & Managing Director